MSME 45-Day Payment Rule

The statutory mandate under Section 15 of the MSMED Act 2006 requiring buyers of goods or services to make payment to registered MSME suppliers within a maximum of 45 days.

Legal Enforceability Under Indian Law

Sections 15 and 16 of the MSMED Act 2006 establish: (1) Maximum credit of 45 days under written agreement, or 15 days without; (2) Default triggers mandatory compound interest with monthly rests at 3 times the RBI Bank Rate; (3) Interest is non-deductible for income tax.

Standard Sample Clause Language

All payments under this contract shall be made within forty-five (45) days of invoice date. In the event of delay, statutory interest under Section 16 of the MSMED Act 2006 shall accrue at 3x the prevailing RBI Bank Rate.

Common Drafting Pitfalls to Avoid

✕Not recording vendor Udyam registration numbers on purchase orders and ERP systems.
✕Failing to raise formal written objections within 15 days of delivery if goods/services are defective.

Frequently Asked Questions

How can MSMEs enforce payment if a large corporate defaults?

MSMEs can file an online petition before the Micro and Small Enterprise Facilitation Council (MSEFC) via the MSME SAMADHAAN portal for conciliation and statutory recovery.

Related Commercial & Legal Terms

Section 43B(h) (Income Tax Act) →

An anti-delay tax provision enacted by the Indian Parliament disallowing business expenditure deductions for any payments owed to Micro and Small enterprises if not paid within statutory MSMED Act timelines.

Draft, review, and e-sign contracts in VoyceBook

Access pre-vetted clause libraries, automate milestone billing, and keep your business legally secure.

Create Free Account